Friday's finish was the lowest for the Dow since April 25, 2003, when it ended at 8,306.35. For the S&P 500, it was the lowest ending since April 11, 2003, when the index finished at 868.30. It was the Nasdaq's lowest close since a May 23, 2003, finish of 1,510.09.

For the week, the Dow fell 5.35 percent, the S&P 500 lost 6.78 percent and the Nasdaq fell 9.31 percent. The week's selling left the Dow down 40.9 percent from its Oct. 9, 2007, record close of 14,164.53, while the S&P 500 is off 44 percent from its peak of a year ago. The Nasdaq is down 45.7 percent. . . .

The Dow Jones Wilshire 5000 Composite Index—a free-float weighted index that measures 5,000 U.S. based companies—ended at 9,514.37, down 403.02 points, or 4.24 percent, for the week. A year ago, the index was at 15,337.70.

The Dow is a couple thousand points below the level where it is when President Bush took office, and we've had roughly 25% inflation since then. Adjusting for inflation, the Dow is down about 41% since President Bush took office in 2001.

Treasury bills and bonds are trading at yields significantly below the annualized inflation rate in each of the last twelve months. After inflation, and before taxation, a T-Bill investor is losing about 4% of the amount invested per year. Treasury bond investors are losing money at a rate of 1 to 2 percent a year on the same basis.

One way to interpret this data is to conclude that the market's current assessment of the risk free rate of return in our economy, sometimes called the "real time value of money" is negative. Another is that the market anticipates deflation over the next three months, and very low inflation over the longer term. Neither of these intepretations are happy ones.

The one good piece of news that flows from the flight to Treasuries, however, is that it reduces the amount of interest that taxpayers must pay on the national debt, and thereby eases the national budget deficit. The reduced interest payments, however, are unlikely to fully mitigate reduced tax collections for 2008.

The Wall Street Journal is advising readers with non-retirement stocks and mutual funds to cash out their losses now for tax purposes, and then reinvest (in something else, so as not to defeat the purpose from a tax perspective). The New York Times meanwhile, has to worry about keeping its own financial house in order, as its bonds have been downgraded to junk status.

The bailout bill was passed October 3rd, followed almost immediately by a market plunge, and implementation started on October 14th. We are now already into the second tier of the spending authorized by the bill. The third tier of spending under the bill is subject to a Congressional veto.

Where is that bailout money going? To finance bank takeovers. This is legal, because there were no strings attached to how banks could use the bailout funding.